Barack Obama’s reelection settles none of the urgent economic questions facing the US. This is why the day after the count, the dollar flagged and stock markets receded.
Nevertheless, Obama’s victory against the economic odds probably represents a civilizational shift, a decisive rejection of the fringe social conservatives who have taken the Republican Party hostage. The Grand Old Party must now consider reinventing itself, and in doing so, move out of the spell of the conservative Tea Party movement.
Those of the Tea Party properly belong to another century. They have become the American equivalent of the Taliban, vehemently imposing its creed on everybody else.
Had it not been for the Tea Party candidates fielded by the GOP to attract that base, Republicans might have wrested control of the US Senate. The ultraconservatives brought disaster to the party, making bizarre remarks such as the fruit of rape being a gift from God.
Recall that Romney’s chances began to improve only after the first presidential debate, where he moved towards a more moderate position. It eventually cost him when the fundamentalists lost interest in a born-again moderate. The party is imploding.
For the fifth straight presidential elections, the Democrats won the popular vote. George W. Bush was brought to the presidency with a minority of a popular vote overridden by a majority at the Electoral College.
Latinos now compose 10% of the US electorate. An impressive 71% of the Latino vote went for Obama. So did substantial majorities of other minority groups.
Among women, 55% voted for Obama and 44% for Romney. Among men, Romney won by 52% to Obama’s 45%. The turnout for women, however, was significantly higher.
Had he stayed away from the absurd conservative positions on the social issues and stuck close to his economic agenda, Romney might have pulled through. Fully 54% of American voters think the US economy is headed in the wrong direction. Unemployment stood at 7.9%.
Fortunately for Obama, the shrill voices from the fundamentalist base of the Republican Party fudged the issues. The debate on the economy could not shine clearly. Two Republican senatorial candidates representing the rightist fringe made complete fools of themselves and consequently lost their respective races.
The Tea Party could not turn back the progress of American civilization.
Sen. Franklin Drilon must be a seriously overworked legislator these days. He chairs both the Senate Finance as well as the Ways and Means committees.
As chair of the Finance committee, he needs to shepherd the administration budget and get it passed before Christmas. As chair of the Ways and Means committee, he is under pressure to pass the “sin tax” measure before the year is done. Both tasks require fine-combing through a huge mass of numbers, making sure the assumptions are correct and the projections viable.
The strain is showing.
In the recent debate on the excise tax measure, Drilon appeared to lack familiarity with the issues at hand. He relied heavily on both BIR Commissioner Kim Henares and DOF undersecretary Jeremias Paul to supply answers to Sen. Ralph Recto’s wilting interpellation.
Recto was clearly the better primed gladiator in the encounter. He spent months studying the measure and its economic repercussions, assisted by a talented staff when he chaired the Ways and Means committee. Earlier, he issued a committee report arguing for a more moderate increase in excise taxes that would achieve the goals of revenue improvement by not drastically reducing consumer demand for the “sin” products.
Recto’s report was described as realistic, reasonable and responsible. It honestly projected a lower revenue intake than the fantastic figure offered by the administration. Because of that, Recto’s report was attacked bitterly by administration mouthpieces and the senator was heckled from his post.
The crux of the debate is the fragile assumption of those who wanted a 1,000% increase in excise taxes that consumer demand will remain constant nonetheless. That fragile assumption is the basis for the fabulous administration estimate that P60 billion will be generated from the DOF-inspired excise tax scheme.
That excise tax scheme, with all its flawed assumptions and faulty projections, was swallowed hook, line and sinker by the House version of the bill. The House, after all, cultivates no reputation for hard and rigorous thinking. The House version likewise fails to discount from the revenue projection the plant closures and farm losses resulting from a drastic increase in excise tax rates.
The assumption that consumer demand will remain constant even if prices rise astronomically defies the economic equivalent of the law of gravity. The basic supply-and-demand graph every freshmen economics student learns as basic canon says that demand drops when prices rise.
When Drilon chose to defend a flawed assumption, he stepped into a quagmire. He had to argue against basic economic wisdom — and lie in order to do that. He insisted that the experience in other jurisdictions shows that higher prices will not lead to lower demand. That is simply not true. There are no facts to support that. Basic economic wisdom holds true in every instance, just like the law of gravity.
Drilon ends up illogical. If price increases will not reduce consumption, as he argues, then why even offer the health benefits argument for raising excise taxes? Advocates of higher sin taxes do say the measure will be healthy by lowering consumer demand for “sin” products.
The health argument torpedoes the claim that raising excise taxes will produce the revenues projected. The assumption is simply fraudulent.